There is no such thing as "too high" of a price. It just comes down to demand and supply.

Famous words before every bubble.

Property.

Dot Com Boom.

Plenty more examples.

If your 'bubble' assertions were true, then TradeHill would've been a collapsed heap of nothing but offers in the market. Yet, I open my browser and see them trading at 15.45 last.

Is 15 'too high'?

To you, I suppose, thinking that any sustained price level is too 'bubblicious', it may be. To me, I understand how price fluctuates and know how to formulate a trading strategy to capture this. Right now, I'm fine with the price where it is because I not only see the last quote, but what the potential target is.

Keep saying 'bubble' though, I suppose you have a chance every hundred years of being right. If you remain solvent, that is.

Mainstream can only mean major merchants adopting it. Not the mom and pop socks, fringe esoteria and undergrad webdesign type peanut markets but a seriously large one like bol.com (Bertelsmann) or Ikea. But I don't think that's very realistic right now.

Quote from: Electrongolf

A persistent economy will justify BTC, not matter what the price.

A persistent economy justifies BTC, but not any price. If 60k traders have on average put $100 into the economy, then that should be the real valuation (6.7 million BTC/6 million USD -> 1 BTC=~0.90 USD). I came to a similar back of a napkin calculation based valuation of the actual economy using Bitcoin (<5 million USD -> <0.8 USD/BTC). Add reasonable speculative margin and it's still not worth anywhere near $15-20. Also factor in 50% inflation from mining this year, 33% next year, I'm pretty sure that kind of growth is not happening on the economy side without a different kind of participation (i.e. I have a feeling the technologically savvy/mental contingent who would accept BTC already do, this market will not grow by 50/33% anymore). If the miners don't cash out, the nominal value diverges from the theoretical one by that amount.

The price must eventually track the size of the economy. Don't make the mistake of extrapolating economy size from all BTC at current price, because most BTC are actually 'worthless' in the sense that they have been mined at near 0 difficulty and aren't participating in the economy (add up the entries in the rich 100 list which haven't moved in blockexplorer). When they suddenly do, at current valuation ($16), the socks and undergrad free time instantly run out, as does exchange liquidity. Which is exactly what you saw in the flash crash, even though that was done with the express intent of driving price down.

You could look at it another way: even though the Mt. Gox attack was dumping ~500k BTC at 0.01, there were still not enough orders to satisfy more than half of it. 260k+ went to an opportunistic 0.01 USD order. If we take the wildly speculative average of 17.5 and 0.01, i.e. 8.75 and multiply that by the ~240k that did go through, we get a liquidity of 2.1 million USD. This is a good indication that the economy cannot be much larger than that (i.e. not orders of magnitudes larger, like a ~200 million USD valuation at a $30 high).

So then you arrive at the speculative value for future expansion of the economy. This simply means that sure, $20 may be reasonable, if you do expect 180 million USD influx within a certain amount of time. The question is, what is this amount of time, and will everyone holding on to BTC keep waiting for this. (the influx itself is possible, there is no $1000 a day limit for putting money in AFAIK, and this limit can be lifted anyway)

Speculative valuation is just that, gambling with the future. Even gamblers have cut off dates by which the gamble has to pay off compared to a traditional investment's return, or a different gamble will be made. When that cutoff date arrives the price must drop and if the gamblers are large enough, it will implode. That will make a large dent in the economy (merchants holding BTC from daily trade will suddenly take a large hit) and many will lose confidence/leave the market, which could end up in a death spiral.

Then there are two other major factors noone seems to take into account: even if speculators hold on and Bitcoin putters on for years without significant leaps, long before then there will be a more or less effective crackdown, and/or preemptive strikes in the form of competing currencies, not to mention the possibility of a protracted smear campaign that will prevent Bitcoin adoption to any significant degree. That eventually means the deathspiral described above.

This danger should offset the speculative optimism and lower the price accordingly, which hasn't happened yet.

BTW, any services around Bitcoin like option markets, banks, podcasts and magazines do NOT constitute a productive economy, they may only enable it. Without agriculture and industry, hairdressers, speechwriters and telephone sanitizers will meet an altogether different fate than they expected

The OP's argument is meaningless since you can't compare a rapidly increasing population base (bitcoin users) with a stable, slightly increasing population base (currency users). Take this factor into consideration and bitcoin is in hyper-deflation (since it's obvious anyways, price per coin from 0.01 to $15, difficulty up x 100000)

The OP's argument is meaningless since you can't compare a rapidly increasing population base (bitcoin users) with a stable, slightly increasing population base (currency users). Take this factor into consideration and bitcoin is in hyper-deflation (since it's obvious anyways, price per coin from 0.01 to $15, difficulty up x 100000)

if it was in deflation that would show up in a massively growing productive economy.

also note that the conclusion from my points is only a small part of my post.most of it was describing a scenario that is required to sustain this price. if you think this scenario is likely I disagree but I don't have any problem with that.I don't think though that an increase in difficulty and price shows that we're on our way to that scenario.

what exactly is a "bitcoin user"? and what differentiates him from a bitcoin speculator?

The OP's argument is meaningless since you can't compare a rapidly increasing population base (bitcoin users) with a stable, slightly increasing population base (currency users). Take this factor into consideration and bitcoin is in hyper-deflation (since it's obvious anyways, price per coin from 0.01 to $15, difficulty up x 100000)

if it was in deflation that would show up in a massively growing productive economy.

also note that the conclusion from my points is only a small part of my post.most of it was describing a scenario that is required to sustain this price. if you think this scenario is likely I disagree but I don't have any problem with that.I don't think though that an increase in difficulty and price shows that we're on our way to that scenario.

what exactly is a "bitcoin user"? and what differentiates him from a bitcoin speculator?

This pretty much sums up my experience trying to buy/sell things in bitcoins. Lowballers, scammers, snotty 18 year olds, europeans, you pay first, no u pay first, etc.. then 'screw it go on ebay and sell it to regular people using regular money'

Is this where I sign up to join "the bitcoin is too damn high!" party?

If I and grow one of those weird mustaches thats is halfway up my face and then put on a tuxedo or whatever can i be a that guy and get a million $$$

how come in politics people can wear a bow tie or whatever like that one weird senator from illinois or other things like in politics u can wear a mr peanut monocle for real and people have to not laugh cuz yer like a real guy in politics...

the more retarded u the more they have pretend yer a real person... but if yer just a regular person u cant get anywhere in politics cuz u got no 'zazz'

how come in politics people can wear a bow tie or whatever like that one weird senator from illinois or other things like in politics u can wear a mr peanut monocle for real and people have to not laugh cuz yer like a real guy in politics...

the more retarded u the more they have pretend yer a real person... but if yer just a regular person u cant get anywhere in politics cuz u got no 'zazz'

I have a headache.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

Tell me Nescio. How would you go about getting $20,000 to Azerbaijan???How much would it cost you?How long would it take?

If you mean a barely visible to 'first world' citizens but nonetheless thriving second/third world use is enough to sustain Bitcoin and the current speculative pricing, I'm not sure this could be reached without the 'mainstream' taking off before.

As long as the exchange rate for that $20k is fueled by speculators for lack of a stabilizing, legitimate economy, noone in their right mind will use it for large sums that could move the market and lose quite a bit on exchange, or during regular swings over time if it was offloaded slowly to prevent market swings. Chicken and egg I'm afraid.

Also, if you exchange the USD to Bitcoin for transfer into Azerbaijan, unless they are going to use the BTC themselves, they need to exchange it back out. If they can do that, they could have probably done a straight USD transfer without Bitcoin as intermediary. It would only be interesting if USD wire to local exchange + USD wire from exchange closer to Azerbaijan with Bitcoin in between would be quicker or cheaper than USD wire to Azerbaijan directly.

The only way I can see a non-mainstream economy taking off earlier is if maybe druglords or similar will use it and set their own prices for stability, but if they do they'll probably fork the blockchain and make sure noone interferes with pricing by running their own private exchanges.

Bitcoin will probably continue to appreciate in value, and the exchanges will be very volatile, until a superior successor to bitcoin is introduced or the speculative bubble that props up 99% of bitcoin's value collapses. I'd definitely buy them at 5-10 cents a coin, but I think that anything over 25 cents/coin is pure speculation, based upon their historical average price.